Hazlitt's argument is seductively self-evident: any argument for government intervention in the free market is wrong because it focuses myopically on the benefciaries of that policy while ignoring the (invariably far more numerous) victims. According to Hazlitt, "Economics is haunted by more fallacies than any other study known to man" because of:

"... the persistent tendency of men to see only the immediate effects of a given policy, or its effects only on a special group, and to neglect to inquire what the long-run effects of that policy will be not only on that special group but on all groups. It is the fallacy of overlooking secondary consequences.

I decided to pick on Hazlitt because he himself suffers from the very same myopia which he credits as the source of so many economic fallacies. It is an instructive exercise to read Hazlitt even if only to see whether you can see past his critiques of what other people have overlooked and figure out what he himself has overlooked. It is easy to get caught up in the fun of demolishing other people's arguments, even if many of them are just straw men, and so miss the fact that you are being snookered. Go on, give it a go. I'll wait.

Did you figure it out?

Identifying Hazlitt's myopia is challenging because most of his arguments are actually correct. Government intervention in free markets usually does lead to all manner of negative consequences. Unfettered capitalism really does lead to increased productivity and societal wealth. Minimum wage legislation really does increase unemployment. And so on and so on. So what's the problem?

Hazlitt himself leads the reader half-way there:

Our study of our lesson would not be complete if, before we took leave of it, we neglected to observe that the fundamental fallacy with which we have been concerned arises not accidentally but systematically. It is an almost inevitable result, in fact, of the division of labor.

In a primitive community, or among pioneers, before the division of labor has arisen, a man works solely for himself or his immediate family. What he consumes is identical with what he produces. There is always a direct and immediate connection between his output and his satisfactions.

But when an elaborate and minute division of labor has set in, this direct and immediate connection ceases to exist. I do not make all the things I consume but, perhaps, only one of them. With the income I derive from making this one commodity, or rendering this one service, I buy all the rest. I wish the price of everything I buy to be low, but it is in my interest for the price of the commodity or services that I have to sell to be high. Therefore, though I wish to see abundance in everything else, it is in my interest for scarcity to exist in the very thing that it is my business to supply. The greater the scarcity, compared to everything else, in this one thing that I supply, the higher will be the reward that I can get for my efforts.

(Emphasis added.)

Hazlitt continues:

Just as there is no technical improvement that would not hurt someone, so there is no change in public taste or morals, even for the better, that would not hurt someone. An increase in sobriety would put thousands of bartenders out of business. A decline in gambling would force croupiers and racing touts to seek more productive occupations. A growth of male chastity would ruin the oldest profession in the world.

But it is not merely those who deliberately pander to men's vices who would be hurt by a sudden improvement in public morals. Among those who would be hurt most are precisely those whose business it is to improve those morals. Preachers would have less to complain about; reformers would lose their causes; the demand for their services and contributions for their support would decline.

If there were no criminals we should need fewer lawyers, judges and firemen, and no jailers, no locksmiths, and (except for such services as untangling traffic snarls) even no policemen.

Under a system of division of labor, in short, it is difficult to think of a greater fulfillment of any human need which would not, at least temporarily, hurt some of the people who have made investments or painfully acquired skill to meet that precise need.

Now it is often not the diffused gain of the increased supply or new discovery that most forcibly strikes even the disinterested observer, but the concentrated loss. The fact that there is more and cheaper coffee for everyone is lost sight of; what is seen is merely that some coffee growers cannot make a living at the lower price. The increased output of shoes at lower cost by the new machine is forgotten; what is seen is a group of men and women thrown out of work. It is altogether proper—it is, in fact, essential to a full understanding of the problem—that the plight of these groups be recognized, that they be dealt with sympathetically, and that we try to see whether some of the gains from this specialized progress cannot be used to help the victims find a productive role elsewhere.

So far so good. Here is where he goes off the rails:

But the solution is never to reduce supplies arbitrarily, to prevent further inventions or discoveries, or to support people for continuing to perform a service that has lost its value.

Really? Why not? On this point Hazlitt is silent. He simply takes it as axiomatic that the more goods and services are being produced the better off the world is. He sees only the forest and misses the trees. And, unfortunately, in this case the trees are people. To someone on the street with no money and no marketable skills it matters not a whit if economic progress has produced cheaper coffee (Hazlitt's example), he still can't afford to buy a cup. Disposing of excess buggy whip makers is a much thornier problem than disposing of excess buggy whips. But Libertarians try to pretend that these are structurally comparable issues.

Unfortunately it doesn't work that way. There are lots of things you can do with buggy whips that you can't so easily do with human beings. You can put buggy whips in warehouses or landfills, but you can't do that with buggy whip makers, at least not in a civil society.

The Liberatarian answer is that when buggy whips become obsolete the buggy whip makers should find something new to do. But this is not always so easy. A fifty year old who has spent his whole life making buggy whips might not have such an easy time learning a new trade, particularly in a world where productive occupations often require decades of training.

The fundamental problem with Liberatarian economics is that there is a positive-feedback effect that tends to put capital in the hands of those who need it the least. This gives those lucky few the leverage to effectively turn everyone else into indentured servants who have to work their entire lives to pay off their debts. Or, even worse, it lets some people slip through the cracks even if they are ready, willing and able to be productive simply because they don't have the capital to find a market for their services (a.k.a. a job).

Certainly in the aggregate the world is better off if we can simply take excess people and, like excess buggy whips, warehouse them or discard them or otherwise turn them into somebody else's problem. But is that really a better world? I think not.

Finding the right quality metric for an economy is not easy, and Ron's First Law applies: all extreme positions are wrong, which in this case means that all facile positions are wrong. The Right wants to increase the average while the Left wants to decrease the variance. Those extremes lead to lassez-faire capitalism and Marxist communism, both of which the world has rightly decided are pretty bad ideas.

The right answer is some sort of engineering compromise: free markets encourage innovation and increase productivity and standards of living, but then I also think there ought to be some government intervention to recycle some of the capital from the top back to the bottom to prevent people from falling into abject poverty and despair. Yes, it's inefficient. Efficiency needs to be tempered with (but not sacrificed to) compassion.

Tuesday, December 26, 2006

Also, Peter Gutman's detailed analysis of Vista's inherent design flaws is getting a lot of attention. Could Vista be the beginning of the end for Microsoft? The Zune disaster doesn't seem to have made much of a dent. But maybe the new year will bring with it a ray of hope that the world will at long last throw off the Microsoft yoke.

Friday, December 15, 2006

The balance of power in the Senate now hangs on the health of South Dakota Senator Tim Johnson, who would almost certainly be replaced by a Republican if he should become unable to serve.

Interestingly, South Dakota law only allows Johnson to be replaced if he actually dies. As long as he's alive it doesn't matter that he can't perform his duties. The presumption is that he will recover eventually, so he can't be replaced. Which makes me wonder: if Johnson were in a persistent vegitative state, would the Republicans be as eager to insist that he be kept alive as they were in the case of Terry Schiavo?

Not that I hope we ever get a chance to actually do that experiment. I'm pretty sure I know what the outcome would be.

So this brings to mind a very strange thing that happened to me the other day. I was having dinner in a restaurant with some friends and we had just polished off a very nice bottle of Riesling and were starting on a 2004 Seghesio Old Vines Zin when I suddenly started feeling woozy. Long story short: I passed out, my wife thought I was having a siezure, and they ended up hauling me away in an ambulance. They ran a full battery of tests on me, including a CAT scan and a tox screen, and found absolutely nothing wrong. Even my blood alchohol came back as 0.000! (That's a trick I need to learn how to repeat!)

Fast forward two weeks. We're at Thanksgiving dinner. My wife has two martinis, which usually doesn't even register, and she starts to feel green around the gills! She ended up losing her lunch and spending four hours conked out in our host's guest room while we chowed down on turkey.

Maybe there's a bug going around that makes people pass out? If so then Johnson's prognosis is good. Neither I nor my wife have had any relapses.

Reddit is down. Not the site itself (as far as I know) but their DNS servers, which are hosted at name-services.com. That site is now full of adwords spam. It's probably been hacked, and any site that used them for DNS service is effectively off the air.

It's odd how addicted to Reddit I have apparently become. I keep hitting reload in the vain hope that the problem will fix itself even though I know it will almost certainly be hours or days. Ironically, reddit itself is almost certainly still up, but there's no way to get to it without knowing its IP address, and the only way to find that out (unless you happen to have a cached copy or wrote it down on a post-it) is, in reddit's case, to get it from name-services.com.

I should look into getting some backup name servers for my own domains. But I probably won't.

Tuesday, December 12, 2006

John McCain wants to extend Federal anti-obscenity laws to blogs. To which I say: Senator McCain, with all due respect (which apparently isn't very much): fuck you and the horse you rode in on. Better yet, fuck you with the horse you rode in on. What part of "Congress shall make no law abridging the freedom of the press" do you not understand?

Monday, December 11, 2006

I decided to wander over to the Huffungton Post this morning just to see what was going on. The very first sentence of actual text on the front page was from a blog entry by Nora Ephron:

"I met Condoleezza Rice last weekend. She was much prettier than I thought she was going to be."

It gets better (or worse depending on your point of view):

Condi was the hostess of the dinner, and she stood up to speak about each of the honorees. She was completely competent. She was, however, not at all funny. She tried to be, but she wasn't.

I wonder how Nora would feel if the shoe were on the other foot:

I read a blog entry by Nora Ephron today. Her picture was so tiny that I couldn't tell if she was good looking or not. I think she might have been trying to be funny, but I really couldn't tell. I guess that means she's not a very good writer. Maybe she should stick to hosting dinner parties, at which she professes to be an expert."